Butcher: A Growing Economy Is Brewing

When small and independent American craft brewers pour into the nation’s capital Tuesday for the 30th annual Craft Brewers Conference & BrewExpo America, D.C., Maryland and Virginia residents will get a firsthand look at one of the country’s fastest-growing employment sectors.

The country’s craft-brewing community will meet not only for inspiring dialogue on the craft-beer revolution but also to discuss ways to grow their small businesses while creating additional jobs and continuing to engage their consumer fan bases. More than 2,000 breweries are currently operating in the U.S. — the most since the late 1800s — and they are responsible for employing more than 100,000 workers. They are our neighbors, our families and our friends.

Craft-beer production is also burgeoning. In 2012, craft-beer volume hopped 15 percent, while dollar growth increased 17 percent, according to the Brewers Association, the not-for-profit trade association dedicated to small and independent American brewers.

As small breweries work to create jobs, attract tourism and support local neighborhoods, we must recognize they are not immune to the host of issues experienced by all small businesses. Brewers face looming increases in essential expenditures: Costs of grains have increased dramatically because of ethanol production. Rising fuel prices harm brewers because their raw ingredients and finished products are heavy, adding high freight costs to the cost of production and distribution. And they face these rising costs in one of the most, if not the most, highly regulated and taxed industry sectors in the country.

Like other small businesses, craft brewers need a tax code that helps them to expand, allowing them to remain competitive in the marketplace, protect existing jobs and stimulate new employment opportunities quickly.

A bill is currently being considered in Congress that would help small brewers do just that. The Small BREW Act seeks to recalibrate the federal beer excise tax that small brewers pay on every barrel of beer they produce.

Under current federal law, brewers making less than 2 million barrels annually pay $7 per barrel on the first 60,000 barrels they brew and $18 per barrel on every barrel thereafter. The proposed legislation would create a new rate structure that reflects the evolution of the craft-brewing industry.

The rate for the smallest brewers and brewpubs would be $3.50 per barrel on the first 60,000 barrels. For production of 60,001 to 2 million barrels, the rate would be $16 per barrel. Any brewer that exceeds 2 million barrels would begin paying the full $18 rate. Breweries with an annual production of 6 million barrels or less would qualify for these tax rates.

To put this into perspective: Anheuser-Busch InBev produces about 100 million barrels of beer in the U.S. and more than 300 million worldwide. The largest U.S. small brewer produces about 2 million barrels, less than 2 percent of the production of the largest multinational brewer. Most small brewers and brewpubs produce 2,000 to 20,000 barrels.

For example, at my brewery in Alexandria, Va., we brewed 6,000 barrels in 2012. Any savings that we would receive through this legislation would be plowed right back into our brewery, enabling us to increase production and the demand for our product. This, in turn, would mean we would need to hire more people to handle the increased production. Congress has not recalibrated the excise tax on small brewers since 1976. At that time, there were 30 small brewers; today, there are more than 70 times as many, each one a driving economic force.

If this legislation is enacted, it would provide small brewers with an additional $60 million per year that would be used to support significant long-term investments in tanks and other equipment and create jobs by growing their businesses on a regional or national scale. Every small brewer in America would receive relief and would be empowered to grow and hire more workers, allowing them to meet the increasing demand for craft beer. This would have positive repercussions down the food chain. That means more jobs for brewers, for hop and barley growers, for tourism boards, for restaurants, local brewpubs and beer shops.

On average, every American lives within 10 miles of a brewery, and millions have toured or tasted at their local brewery. The U.S. now has more beer styles and brands to choose from than any other market in the world, allowing craft-beer beginners and enthusiasts access to the planet’s most diverse selection of uniquely flavored beer, produced by independent brewers. These small breweries are truly a national treasure. They are the backbone of a thriving economy. We must do what we can to make sure the little guys succeed.

Bill Butcher is founder of the Port City Brewing Co., based in Alexandria, Va.